Monday, 19 September 2011

UK: Government consults on executive remuneration and outlines new narrative reporting framework

The Department for Business, Innovation and Skills published a couple of consultation papers today. The first concerns executive remuneration and is available here (pdf). In this paper the Government asks fifteen questions concerning the structure of remuneration, the role of remuneration committees, the role of shareholders and promoting best practice. Question one, for example, asks whether providing shareholders with a binding vote on remuneration would improve their ability to hold companies to account on pay and performance.

The second paper, unlike the first, contains specific proposals. It sets out the Government's proposals for a new narrative reporting framework: see here (pdf). The Government proposes that the current Directors' Report should be abolished and that quoted companies and medium and large companies should publish a Strategic Report (replacing the Business Review). All companies will be required to prepare an Annual Directors' Statement. Major changes are proposed with regard to the Directors' Remuneration Report, which will become part of the Annual Directors' Statement with important information moving to the Strategic Report. In addition, changes to what quoted companies must disclose with regard to remuneration are proposed, including more information on the relationship between pay and performance.

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